Ins and outs of Korean credit
Many aspects of the credit card system in Korea are probably a little different than what we may be used to back home — wherever that may be. First of all, when applying for a credit card from your local bank, you probably have hundreds of different options to choose from.
There is a card for everyone, each with unique features and benefits. There’s a card for the coffee lover, the department store shopper, the air mile collector and the golfer. Let your teller know what kinds of benefits you want from your credit card. You can earn big discounts and enjoy many benefits if you choose a card that best suits your lifestyle.
Second, you will have to link your credit card directly to your bank account so that each month, on the designated payment date that you choose, your entire credit card balance can be automatically deducted from this account. This may seem strange to those who are used to carrying a revolving balance. In the United States, for example, we only need to pay a small “minimum” every month and can keep a revolving balance on the card that is subject to a relatively high interest rate from the credit card company. We could theoretically go on forever (or at least until we have reached our credit limit), accruing interest owed on our balance and paying just $15 per month.
So, when managing your cash flow and protecting your credit rating, it is important to note that there may be a gap between when you actually make the purchases with your credit card and the designated payment date that the money is automatically deducted from your account. Let’s imagine, for example, that your designated payment date is the 30th of every month. Purchases made from the 15th of the previous month to the 14th of the current month will be automatically deducted from your account on the 30th of every month. Notice the two-week gap. Be sure you understand the payment cycle and have sufficient balance in your account on your designated payment date.
This brings us to the third difference. In Korea, credit cards act more like charge cards — there is no way to just pay a minimum amount each month. The entire balance is automatically deducted from your bank account on the designated payment date.
However, you do have the option of making installment payments. Interestingly, if you buy several items at once, you can choose which items you wish to pay for in installments. If you would like to pay for a specific purchase in three-month or even 24-month installment payments, just ask the retailer at the time of making the purchase. Most retailers will allow it, but some smaller shops will not. If you forget to ask the retailer at the time of purchase, just call your card issuer’s call center when you get home and let them know. Don’t wait too long to let the card issuer know that you want to pay for that purchase in installments, because once the transaction has been fully processed, the option to pay in installments may be unavailable.
Remember, though, that when you choose to pay for credit card purchases with installment payments, some of your credit card benefits will not be applied. For example, if you are earning air mileage, and pay for a purchase in installments, the air miles may not accrue for that purchase. Be sure you understand your card issuer’s policies before using the installment payment option.
Lastly, you can also use your credit card to withdraw cash at ATMs and as a post-paid transportation card on buses, in taxis and on the subway, but if you would like these features, be sure to ask your teller to apply them to your card when you apply.
Shinhan Bank Foreign Customer Department